European officials again slapped Microsoft Corp. for abusing its dominance in computer operating systems, when a court on Monday rejected the software giant’s appeal of a 2004 antitrust ruling and a record $689 million fine.
Other American companies that dominate their markets, such as Apple Inc. in digital music, Google Inc. in Web search and Intel Corp. in computer chips, also might feel the sting.
Antitrust experts called the decision by Europe’s second-highest court a landmark ruling that validated the aggressive approach recently taken by the European Union’s competition commission — especially when compared with the Bush administration’s more hands-off approach to regulating companies that exploit their market dominance.
Europe’s importance to American companies guarantees the sharpness of its corporate watchdog’s teeth. The tougher standards set in Brussels will dictate how multinational companies compete around the world.
“The case is historic and good news for consumers, not just in Europe but in the United States and worldwide,” said Robert H. Lande, a University of Baltimore law professor and director of the American Antitrust Institute, a consumer-focused think tank in Washington. “Europe is the vigilant cop on the beat and the United States … is strolling around with the nightstick behind its back.”
The European Court of First Instance in Brussels sided with competition officials on almost every major aspect of the Microsoft case, which centered around complaints that the software giant’s business practices were designed to squash its rivals.
The court agreed that that the Redmond, Wash., company had improperly tied its Windows Media Player to its dominant Windows operating system and refused to adequately disclose software code to other companies so their products would work with Microsoft’s.
But the emphatic confirmation of Europe’s leading role on antitrust enforcement did not go over well with some in Washington.
Thomas O. Barnett, head of the antitrust division in the U.S. Justice Department, criticized the decision, saying it protected competitors rather than competition. He said it could harm consumers “by chilling innovation and discouraging competition.”
Rep. Robert Wexler (D-Fla.), chairman of a House subcommittee overseeing U.S. relations with Europe, promised to hold a hearing on the ruling, which he derided as a “new form of protectionism.”
“I am concerned that American high-tech companies, including Microsoft, are being unfairly targeted by zealous European Commission regulators,” he said. “It would be disastrous if the court’s decision against Microsoft leads to a deluge of new antitrust cases in Brussels, which appear to already be starting.”
Although the ruling has important ramifications for Microsoft Corp. — including the record fine and threats of more if it doesn’t comply — many of the issues it addresses are less relevant because of technological change.
The complaints behind the case date back to 1998, before the rise of the Internet as a major computing platform.
Microsoft’s Windows operating system runs the software that lets people perform tasks with their computers, giving the company great power to favor its own programs such as e-mail, word processors and music players. But Windows’ importance has been blunted in the last decade because many of those tasks can now be done through online programs accessed through Internet browsers.
As a result, Monday’s ruling isn’t expected to have much immediate impact on U.S. computer users. For example, Microsoft already has been fulfilling one of its requirements under the case by selling a version of its Windows software without the integrated Windows Media Player in Europe. But it has no plans to sell a similar version here.
Investors shook off the news, sending Microsoft shares down only about 1 percent Monday, to $28.72.
But, in the long term, the EU’s antitrust stance might create challenges for Microsoft’s high-tech brethren, even ones with which it competes.
Cupertino, Calif.-based Apple, Santa Clara, Calif.-based Intel and San Diego-based Qualcomm Inc. all are facing investigations into charges that they used anti-competitive behavior — and that consumers paid higher prices or received lesser products as a result.
“I think you’re going to have to be nervous,” Ted Henneberry, co-chair of the European practice group at the law firm Heller Ehrman, said of executives at those companies. “With the ruling as strong as it was, it will leave an open invitation to the competitors of these companies to complain that they are being blocked from being able to compete.”
Brad Smith, Microsoft’s senior vice president and general counsel, called the decision “disappointing” and said the company had not decided whether to again appeal.
He said Microsoft was “100 percent committed to complying with every aspect of the commission’s decision.”
Smith said Microsoft had changed its practices, noting the different versions of its Windows XP and Vista operating systems in Europe without Windows Media Player and the company’s work with the commission to share the technical specifications for its communications protocols.
Smith said the European court ruling held broader implications for technology companies that dominate their markets, such as Apple and Google.
“The decision quite clearly gives the commission quite broad power and quite broad discretion,” he said.
Anthony Woolich, head of competition law at London-based law firm LG, predicted the ruling would not trigger an avalanche of European antitrust cases. But, he said, it did serve as a warning to companies.
“In the European Union, it is not a problem simply to have a dominant market position. That is not unlawful,” he said. “What can be a problem is if you abuse that dominant position.”
